Electricity suppliers might pass along AEP fee

Thursday

Evidence is starting to emerge about how electricity suppliers will react if state regulators grant American Electric Power's request to modify a fee paid by competitors.

Evidence is starting to emerge about how electricity suppliers will react if state regulators grant American Electric Power's request to modify a fee paid by competitors.

DPL Energy already is passing the costs on to customers, according to a filing by grocery chain Aldi Inc. with the Public Utilities Commission of Ohio.

Border Energy executives have decided that up to half of the cost will be passed on to customers.The PUCO last month approved temporary changes in the "capacity charge" that electricity suppliers must pay each month.

The panel will likely issue a ruling as soon as Monday that will set the charges for the next few years, and they might be higher or lower than the temporary plan.

"We are angry and frustrated that you would approve a measure that would have such a devastating effect on our efforts," said Russ White, director of real estate for Aldi's Springfield division, in a letter to the PUCO.

The company said its rates have risen 10 percent a month, adding $6,600 to the cost of doing business, based on the temporary increases that are in place.

AEP says it needs to raise the charge to help stabilize its finances during a multiyear transition to a new pricing system. If its request is not granted, the company has said it may lay off workers and reduce charitable giving; it would even consider moving its headquarters out of Columbus.

Asked about Aldi's concerns, an AEP spokesman said customers should review their contracts with suppliers and "should be aware of any potential cost increases specified in the agreement.

"The Ohio Manufacturers' Association, which is an opponent of AEP's plan, issued a report this month estimating that Franklin County businesses will pay an additional $71 million to $267 million over the next three years if the PUCO approves a higher charge.

The range of costs is based on the different levels at which the PUCO may set the fee.

The county has 12,389 businesses that have chosen an alternative electricity supplier, the report says.

Asked for a response, AEP said, "We absolutely dispute the numbers, because they were based on the huge assumption" that customers will absorb 100 percent of the increase in capacity charges.

The sides disagree about even the most basic details. For example, when the PUCO passed the temporary change in the capacity charge, several of the participants in the case said that this was a huge increase.

AEP said that the decision wasn't an increase because it maintained the status quo.From June 2011 until last month, the capacity price set by the market was the equivalent of $8 per month for a typical household.

Then, on June 1, the market price dropped to about $1 per month. The PUCO's action kept the price at $8 in AEP territory, depriving consumers of the decrease they would otherwise have received.

FirstEnergy Solutions is not yet saying how it will deal with an increase.

A spokesman said the company, the leading challenger to AEP, is "very concerned about the effect the capacity charge" will have on customers' ability to save on their energy costs.Aldi's electricity supplier, DPL Energy, immediately passed the temporary increase on to its customers in bills that arrived this month. The grocer has 17 buildings served by DPL.

Border Energy will pass along up to half of any increase. The cost will appear on bills as "AEP capacity charge," said company CEO Steve Casciani.

The company sent customers a letter informing them about the case and asking them to contact the PUCO and urge rejection of the higher charge. The envelope included a stamped postcard that customers could sign. So far, the PUCO has received about 6,000 of the postcards, which is about 20 percent of the number that Border sent to customers, Casciani said. He describes this is an extraordinarily high response rate. The cards make up the large majority of the 6,500 or so letters the commission has received on the issue.

Companies such as DPL, Border and FirstEnergy Solutions act as alternatives to AEP. Households and businesses often decide to switch suppliers because of the promise of savings. The contracts usually allow the supplier to change its prices if the PUCO alters the underlying cost structure in any way.

dgearino@dispatch.com

@dispatchenergy

AEP cases

The Public Utilities Commission of Ohio has under review two hotly contested cases related to American Electric Power's income and rates.

• Capacity charge case

The issues: AEP is seeking to increase the "capacity charge" paid by competitors that serve customers in AEP's territory. The charge is paid by the competitors, which can choose whether to pass it along to customers. If AEP gets the charge it is seeking, costs would increase by about 10 percent.

The timetable: The PUCO has approved several temporary changes to the charge. The panel will likely issue a long-term ruling on Monday.

• Rate increase case

The issues: The PUCO approved a rate increase in December, which the panel then threw out a few months later following complaints about rate shocks. AEP has submitted a new plan that would raise rates over the next few years and also shift to a pricing system based on market forces.

The timetable: Hearings continue in this case. A final ruling will likely be issued in August or September.

Source: Dispatch research

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